Knowledge Solves Problems

In today’s world, it’s easy to be a pessimist. If you pick up a newspaper, turn on the news, or open your social media feed, the problems are front and center, reminding us of the many things that can go wrong.

Old problems are replaced with new, bigger problems. The cycle is unrelenting and constantly accelerating. Given all this, it is unsurprising that we can forget to look up. But if we do, we’ll see something truly amazing–the sun rising every morning. The sunrise should always be the top headline because it reflects the one force that ultimately contributes to every solution: time.

While time alone does not solve problems, it does give us more capacity to find solutions. New solutions have their roots in the exponential power of compounding knowledge. Compounding and exponential are two of the most underappreciated concepts in the growth of society.

The Power of Compounding

Finance 101 teaches the concept of compound interest, which Albert Einstein once proclaimed as the “eighth wonder of the world.” However, few people fully grasp its power. To illustrate, consider investing $100 in two different investments:

• Investment A pays 50% simple interest for 20 years.
• Investment B pays 20% compound annual interest for 20 years.

While investment A has a head start, earning 30% more interest on its base value ($100), that base value never changes. This results in $50 of annual interest for 20 years or a total cumulative value of $1,100. For Investment B, by year 20, the 20% interest is applied to a base value of $3,195, resulting in a $3,834 cumulative value. The power of compounding comes from the annual growth of the base.

Compounding Knowledge

The concept of compounding can also be applied to knowledge. We begin every day with the collective knowledge we have accumulated throughout our lives. We do not have to relearn what we already know.

While knowledge compounds individually, it can also grow exponentially as communication between people increases. We expand our knowledge base through the experiences and knowledge of others. With each new method of communication—verbal, written, or electronic—the pace of our knowledge growth accelerates.

Exponential Knowledge Growth

In his book Critical Path, Buckminster Fuller coined the knowledge doubling curve. His theory estimates that human knowledge was doubling every 100 years in 1900. As communication capacity expanded, knowledge growth accelerated, and by 1945, Mr. Fuller estimated the pace of doubling had quickened to every 25 years. At the time of his book’s publication (1982), he estimated knowledge was doubling every 12 to 13 months.

In a 2006 paper “The toxic terabyte: How data-dumping threatens business efficiency,” IBM theorized that the internet could accelerate the pace of knowledge doubling to every 12 hours by 2020.?

The ultimate power of the internet is the globalization of knowledge.?

Back to Today’s Problems

Some people might assume that the base of humanity’s knowledge cannot accelerate any faster. Most of the world is well-connected with immediate access to society’s collective knowledge. The ‘some’ who assume this are likely pessimists as they rightfully believe today’s problems are too large for today’s solutions.

However, if you give highly intelligent and motivated people a problem—knowledge growth cannot accelerate any faster—they’ll come up with a solution.

There are two primary factors that influence knowledge growth: smart people and communication.? Much of the acceleration over the last hundred years has been driven by technological advances in communication. The next wave will likely be driven by expanding the universe of smart people through artificial intelligence.

Looking forward

By no means is this an endorsement for us to dismiss today’s problems or leave our problem-solving to a certain group of individuals. Rather, we should be optimistic that today’s problems will be addressed with tomorrow’s knowledge in hand—knowledge that continues to accelerate at unprecedented rates.

There is one factor that could truly disrupt this cycle: time. The power of compounding can only be captured over time and Charlie Munger’s first rule of compounding is to “never interrupt it unnecessarily.” Problems that could interrupt the compounding of knowledge pose the most significant threats to our solutions. This would force the world to solve tomorrow’s problems with today’s knowledge and solutions, a very pessimistic prospect.

Until then, it’s important to remember that the sun came up this morning and will almost certainly rise again tomorrow.

By Jim Underwood, a recovering pessimist